Question

The Warren family signed an exclusive real estate listing agreement with Detlefsen real estate brokerage to sell their property. The agreement provided that the Warren's were obligated to pay a commission of 5% of the sales price if they sell the property to any person during the term of the exclusive listing agreement. The term of the agreement was six months long running from January 1 of the year through June 30th. Detlefsen marketed the property and secured several offers with the highest offer being $700,000 from Ivy Jones which the Warren's agreed to on May 30th of that year. This sales contract had a provision that in the event of default by the Warren's Ivy Jones only recourse would be a refund of her $10,000 deposit. Subsequently, a friend of the Warren's, Zaine Johnson a person unknown to Detlefsen, found out the Warrens were selling the property and offered to buy it for $800,000. The Warren's thus, subsequently cancelled the sales contract to Ivy Jones and returned her $10,000. They then waited until July 1, after the term of their exclusive contract with Detlefsen had lapsed and signed a written agreement to see the property to Zaine Johnson. Does the Warren family owe any brokers fee to Detlefsen for the sale of the property? Why or why not? If a fee is owed what should it be based on the $700,000 sales price or the $800,000 sales price? Discuss.

Answer 1

Warren owes brokerage fee to Detlefsen based on sales price of 700 k since the sale of property to Ivy Johnson was affected by Detlefsen acting as a broker/ representative/ agent of Warren’s property during the validity of the listing agreement. The subsequent decision of Warren to terminate the sales contract entered into with Ivy Johnson will not adversely affect the right of Detlefsen to recover the consideration of 5 per cent sales commission for undertaking the obligation of securing an offer and thereby affecting sale of Warren’s property.